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Text size [+][-]  Friday November 20 2009GLOBAL EDITION

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09 Jun 2008 15:10

Ebb and flow

By Dwight Cass

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SEC chairman Christopher Cox, Fed chairman Ben Bernanke, New York Fed president Tim Geithner and Treasury undersecretary Robert Steel testified before the US Senate Banking Committee on April 3 about their involvement in the Bear Stearns rescue.

Cox said: "I recently wrote to the Basel Committee offering my strong support for their proposed work to consider whether the capital adequacy standards applicable to internationally active sophisticated institutions should be extended to deal explicitly with liquidity risk”.

 
The SEC’s boss supports tweaking capital rules to cover liquidity risk. But Bear Stearns’ collapse shows how lightning-fast a liquidity crisis can strike. It’s unlikely a bank could act fast enough to raise capital when its counterparties are running for the exits.

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